1. MGT301 Principles of Marketing
Lecture-23

2. Summary of Lecture-22

3. Consumer Adoption Process
Communicate Availability
Communicate Benefits
Emphasize Advantages
Motivate Consumers
Ensure Satisfaction
Strategy
Awareness
Interest
Evaluation
Trial
Adoption

4. Product Life-Cycle (PLC)
Time
Product
Development
Stage
Introduction
Profits
Sales
Growth
Maturity
Decline
Sales and
Profits ($)
Sales and Profits Over
the Product’s Life From
Inception to Demise

5. Today’s Topics
Product

6. Value-Driven Marketing
A customer’s subjective assessment of benefits relative to the costs in determining the worth of a product
Customer value = customer benefits – customer costs
Customer benefits
Anything desired by the customer that is received in an exchange
Customer costs
Anything a customer gives up in an exchange for benefits
Monetary price of the benefit
Search costs (time and effort) to locate the product
Risks associated with the exchange

7. Benefits Consumers don’t buy products; they buy benefits
Functional benefits: relating to the practical purpose a product serves
Psychological benefits: relating to how a product makes one feel

8. Segmentation

9. Market Segmentation Market Targeting Market Positioning
1. Identify
segmentation
variables and
segment the
market
2. Develop
profiles of
resulting
segments
3. Evaluate
attractiveness
of each
segment
4. Select the
target
segment(s)
5. Identify
possible
positioning
concepts for
each target
segment
6. Select,
develop, and
communicate
the chosen
concept

10. Question: Why do you buy a product?

11. Marketing Mix 4 Ps

12. Marketing is the involved process of determining the 4 P’s of the Marketing Mix
Product
Price
Promotion
Place (Distribution)

13. Product Target Market Price Place Promotion The Marketing Mix
Four marketing activities—product, Price, Place and Promotion—that a firm can control to meet the needs of customers within its target market
Product
Target Market
Price
Place
Promotion

16. Definitions
Product
Anything offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want.
Service
Any activity or benefit that one party can offer to another that is essentially intangible and does not result in ownership of anything.

17. Goods
Services

18. Sold Then Produced and/
Goods
Services
Tangible
Produced Then Sold
Intangible
Sold Then Produced and/
or Consumed Same Time

19. Sold Then Produced and/ Can Store and Transport
Tangible
Produced Then Sold
Intangible
Sold Then Produced and/
or Consumed Same Time
Can Store and Transport
Produced Separate
From Consumer
Perishable
Often Produced In
Consumer's Presence
Goods
Services

20. Levels of Products

21. Core Benefit or Service
Augmented
Product
Product Levels
This CTR corresponds to Figure 8-1 on p. 239 and relates to the material on pp
Installation
Packaging
Brand
Name
Features
Delivery
& Credit
After-
Sale
Service
Core
Benefit or
Service
Product
A product is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need. Products can be physical objects, services, persons, places, organizations, and ideas.
Product Levels
Core Product. This concept refers to the use-benefit, problem-solving service that the consumer is really buying when purchasing a product.
Actual Product. The actual product is the tangible product or intangible service that serves as the medium for receiving core product benefits. Five characteristics:
Quality Level refers to product performance.
Features include combinations of product attributes.
Design consists of aesthetic or ergonomic aspects of the product.
Brand Name may help consumers position and identify the product.
Packaging serves to both protect the product and to promote it to consumers.
Augmented Product. The augmented consists of the measures taken to help the consumer put the actual product to sustained use. Measures can include installation, delivery & credit, warranties, and after sale service.
Quality
Level
Design
Warranty
Core
Product
Actual
Product

22. Product Classifications

23. Individual Product Decisions
Product Attributes
Branding
Packaging
Labeling
Product Support Services

24. Product Attributes
Developing a Product or Service Involves Defining the Benefits that it Will Offer

25. Quality Features Design
Product Attribute Decisions
This CTR relates to the material on pp
Quality
Features
Product Attribute Decisions
Product Quality. Product quality stands for the ability of a product to perform its functions. Quality includes the attributes of overall durability, reliability, precision, ease of operations, and quality consistency -- the ability to maintain the targeted level of quality in delivering benefits to consumers. The importance of quality has lead to widespread adoption of Demings Total Quality Management.
Product Features. The number and combination of product features offered consumers are assessed in terms of customer value versus company cost. Consumers seek value and need-satisfaction. Features irrelevant to consumers are undesirable. Also, additional features cost money to produce and higher quality features are more costly still. Product feature decisions must be carefully tied to consumer needs and consumer perceptions of received, affordable value.
Product Design. Product design combines attention to style (appearance) with enhanced performance. Style alone may attract attention but not improve performance.
Discussion Note: You may wish to discuss how style may adversely affect perceptions of product performance. Good styling may inadvertently lead to higher performance expectations on the part of the interested consumer. For this reason, product attribute decisions incorporating a marketing perspective should focus on product design over style alone.
Design

26. Branding

27. Brand
A name, term, sign, symbol, or design, or a combination of these, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those competitors

28. Why Incur the Cost & Efforts to Brand?
To Brand or Not to Brand?
Why Incur the Cost & Efforts to Brand?

29. Brand Name Selection A Good Brand Name Is... Short and simple
Suggestive of product benefits
Legally available
No negative imagery
Easy to spell, read, and pronounce
Adaptable for international markets
Adaptable to packaging/labeling needs
Adaptable to any advertising medium
A Good
Brand Name
Is...

30. Brand Development

31. Four Brand Strategies Product Category Brand Name Line Extension
Multibrands
Brand Extension
New Brands
Brand Name
Existing
New
Product Category

32. Packaging

33. Goals of Packaging Protection against damage, spoilage, tampering etc.
Assistance in marketing the product
Cost effectiveness (and good for the environment)

34. Labeling

35. Sales Tasks Competitive Advantages Product Safety Packaging Labeling
Packaging Decisions
This CTR relates to the material on pp
Sales
Tasks
Competitive
Advantages
Product
Safety
Packaging
Labeling
Packaging Concept
The packaging concept states what the package should be or do for the product in support of marketing objectives. Packaging includes the activities of designing and producing the container or wrapper for a product. The package includes the immediate container (that holds the product for use), a secondary package that is discarded prior to use, and a shipping package necessary for storage and shipping.
Discussion Note: Both environmentalists and consumer groups have complained about unnecessary packaging. Environmentalists point out the ecological costs of more packages to throw away. Many firms now recycle packages to reduce wastes and save money. Consumer groups, such as Consumer’s Union (publisher of Consumer Reports), express concern that unnecessary packaging costs consumers more.
Labeling Decisions
Labels perform several functions. Labels identify, describe, and promote the product. Also, labels must meet the demands of legal regulations.
Identifies. Especially in support of brand strategies, labels distinguish the product from others.
Describes. Labels can provide information about contents, production, freshness, and instructions on safe and effective use.
Promotes. Use of color and graphics can stimulate and arouse consumer attention for the product.
Legal Regulation
Mis-use of labels has lead to regulation on product claims, the addition of unit prices, open dating, and nutritional labeling for processed foods. Including all required information is necessary to ward off governmental investigations.
Identifies
Describes
Promotes

36. Universal Product Code (UPC)
A bar code on a product’s package that provides information read by optical scanners.
UPC codes provide several advantages: labor saving, improve inventory control, and help with marketing research.

37. Product - Support Services

38. Product Line Strategies

39. Product Line Extensions Adding new items to line
Stretching
Adding new items to line
Filling
Adding sizes or styles
Contracting a
Product Line
Dropping items
Downward
Upward
Two-way

40. New Product Development

41. Major Stages in New-Product Development
Idea
Generation
Screening
Concept
Development
and Testing
Marketing
Strategy
Business
Analysis
Product
Test
Commercialization

42. Consumer Adoption Process
Communicate Availability
Communicate Benefits
Emphasize Advantages
Motivate Consumers
Ensure Satisfaction
Strategy
Awareness
Interest
Evaluation
Trial
Adoption

43. Product Life-Cycle (PLC)
Time
Product
Development
Stage
Introduction
Profits
Sales
Growth
Maturity
Decline
Sales and
Profits ($)
Sales and Profits Over
the Product’s Life From
Inception to Demise

44. Product Life-Cycle Strategies

45. Product Development Stage
Time
Product
Development
Stage
Introduction
Profits
Sales
Growth
Maturity
Decline
Sales and
Profits ($)
Sales and Profits Over
the Product’s Life From
Inception to Demise

46. PLC Stages Product development
Begins when the company develops a new-product idea
Sales are zero
Investment costs are high
Profits are negative
Product development
Introduction
Growth
Maturity
Decline

47. Introduction Stage

48. Time
Product
Development
Stage
Introduction
Profits
Sales
Growth
Maturity
Decline
Sales and
Profits ($)
Sales and Profits Over
the Product’s Life From
Inception to Demise

49. Product Life-Cycle Strategies Low sales Sales
This CTR relates to the material on pp. 289 and 293.
Low sales
Sales
High cost per customer
Costs
Negative
Profits
Product Life Cycle Strategies
Introduction. In this stage marketers spend heavily on promotions to inform the target market about the new product's benefits. Low or negative profits may encourage the company to price the product high to help offset expenses. companies can concentrate on skimming strategies to generate high profits now or on penetration strategies to build market share and dominant the market for larger profits once the market stabilizes.
Create product awareness
and trial
Marketing Objectives
Product
Offer a basic product
Price
Use cost-plus
Distribution
Build selective distribution
Advertising
Build product awareness among early adopters and dealers

50. Growth Stage

51. Time
Product
Development
Stage
Introduction
Profits
Sales
Growth
Maturity
Decline
Sales and
Profits ($)
Sales and Profits Over
the Product’s Life From
Inception to Demise

52. Product Life-Cycle Strategies Sales Rapidly rising sales
This CTR relates to the material on pp and 293.
Sales
Rapidly rising sales
Average cost per customer
Costs
Rising profits
Profits
Product Life-Cycle Strategies
Growth. In this stage the company experiences both increasing sales and competition. Promotion costs are spread over larger volume and strategic decisions focus on growth strategies. Strategies include adding new features, improving quality, increasing distribution, and entering new market segments.
Marketing Objectives
Maximize market share
Offer product extensions, service, warranty
Product
Price
Price to penetrate market
Distribution
Build intensive distribution
Build awareness and interest in the mass market
Advertising

53. Maturity Stage Time Product Development Stage Introduction Profits
Sales
Growth
Maturity
Decline
Sales and
Profits ($)
Sales and Profits Over
the Product’s Life From
Inception to Demise

54. Product Life-Cycle Strategies Sales Peak sales
This CTR relates to the material on pp and 293.
Sales
Peak sales
Costs
Low cost per customer
High profits
Profits
Product Life Cycle Strategies
Maturity. In this stage the company must manage slower growth over a longer period of time. Strategic decisions made in the growth stage may limit choices now. Marketing managers must proactively seek advantage by either market modification to increase consumption, product modification to attract new users (quality, feature, and style improvements), or marketing mix modification in an attempt to improve competitive position.
Maximize profit while defending
market share
Marketing Objectives
Product
Diversify brand and models
Price
Price to match or best competitors
Distribution
Build more intensive distribution
Advertising
Stress brand differences and benefits

55. Decline Stage

56. Time
Product
Development
Stage
Introduction
Profits
Sales
Growth
Maturity
Decline
Sales and
Profits ($)
Sales and Profits Over
the Product’s Life From
Inception to Demise

57. Product Life-Cycle Strategies
This CTR relates to the material on pp
Sales
Declining sales
Low cost per customer
Costs
Profits
Declining profits
Marketing Objectives
Reduce expenditure and milk the brand
Product Life Cycle Strategies
Decline. In this stage the costs of managing the product may eventually exceed profits. Rate of decline is a major factor in setting strategy. Management may maintain the brand as competitors drop out, harvest the brand by reducing costs of support for short term profit increases, or drop the product (divest) altogether.
Product
Phase out weak items
Price
Cut price
Distribution
Go selective: phase out unprofitable outlets
Advertising
Reduce to level needed to retain
hard-core loyal customers

58. Extending the Product Life Cycle

59. To prevent the product going into decline you modify the product
Adding new features, variations, model varieties will change the consumer reaction - create more demand therefore you attract more users

60. Enough for today. . .

61. Summary
Product

62. Next….
4-P’s price

63. MGT301 Principles of Marketing
Lecture-23